IE 11 is not supported. For an optimal experience visit our site on another browser.

Senate panel expected to OK 2008 budget

A Senate panel is poised to approve a budget blueprint awarding near-term spending boosts for Democratic favorites such as education and veterans programs, while putting off difficult decisions on taxes, Social Security and Medicare.
/ Source: The Associated Press

A Senate panel is poised to approve a budget blueprint awarding near-term spending boosts for Democratic favorites such as education and veterans programs, while putting off difficult decisions on taxes, Social Security and Medicare.

Debate Thursday in the Senate Budget Committee promised to end in party-line endorsement of a $2.9 trillion plan drafted by committee Chairman Kent Conrad, D-N.D. Debate in the full Senate begins next week.

The budget plan is nonbinding but lays out Democratic preferences on tax and spending policies. Its most immediate impact would be to award increases to domestic programs while making it difficult for lawmakers to finance tax cuts or increased spending on federal benefit programs like Medicare with budget deficit dollars.

'A responsible beginning'
While claiming to produce a $132 billion surplus in five years, Conrad's budget actually would increase the deficit from $212 billion in the ongoing 2007 budget year to $249 billion in 2008.

With cooperation among Democrats and Republicans in short supply on difficult budget issues, Conrad took a pass on trying to tackle the long-term fiscal debacle facing Social Security and Medicare, the federal retirement programs that will be swamped by the upcoming retirement of the baby boom generation.

"This is a beginning, and I believe it's a responsible beginning," Conrad said.

"It's a missed opportunity because this is a non-election year," White House budget director Rob Portman countered in an interview. Traditionally, Congress is most aggressive on politically sensitive budget issues when elections aren't looming.

Conrad's $2.9 trillion budget plan came under immediate attack from Republicans for assuming Bush's tax cuts expire in 2010 as under current law - unless lawmakers come up with more than $400 billion in additional revenues.

And it assumes lawmakers will pass big revenue increases to finance changes to the alternative minimum tax that promise to be almost equally as expensive.

Political reality
The pending expiration of Bush's cuts to income tax rates, penalties on married couples, inheritances and investments is a product of an obscure Senate rule governing debate on Bush's 2001 and 2003 tax cuts.

Bush frequently calls for his tax cuts to be made permanent, but Republicans have never seriously tried to renew them and Conrad assumes those decisions will be left to the next Congress and whoever is elected to succeed Bush.

"That's just political reality," Conrad said

Republicans say Conrad is being far too optimistic in claiming easy revenues on paper from shutting down offshore tax havens and improving IRS tax collections - while downplaying all-but-inevitable increases in tax rates.

For now, the Senate Democratic plan seems aimed chiefly at getting Congress' arcane budget process back on track after years of off-and-on success. Republicans failed to complete their budget work last year, resulting in a messy $464 billion catchall spending bill that passed last month.

Potential budget veto?
The annual congressional budget resolution is a nonbinding document that sets guidelines for subsequent legislation. Its most important feature often is to impose a "cap" on the 12 annual spending bills produced by the appropriations committees.

In that regard, the Democratic plan is far more generous to non-defense appropriated programs - including education, grants to state and local governments and law enforcement agencies - than is Bush's budget plan, rewarding them with an $18 billion increase as opposed to the less than $4 billion boost Bush recommended.

The move appears to set up a clash this September with Bush, who has yet to veto a single appropriations bill, but who seems eager to get started.

Sen. Judd Gregg, the top Republican on the Budget Committee, said the Democratic plan "contains significant new spending, significant new taxes, significant new debt and absolutely no attempt to address the long-term problems we face."

Medicare and taxes
On the ticklish issue of Medicare, the Democratic plan would pare $15 billion from payments to private insurance companies providing Medicare coverage. It rejects Bush budget proposals to impose payment cuts on Medicare providers such as hospitals, nursing homes and home care providers, and larger premiums on higher-income beneficiaries.

The $15 billion in Medicare cuts assumed under Conrad's blueprint would be used to increase the number of children in low-income families receiving health insurance through the popular State Children's Health Insurance Program.

On taxes, this year's debate appears likely to be limited to easing the pinch of the alternative minimum tax on middle class taxpayers. The AMT was originally designed to apply only to the wealthy, but now threatens to ensnare 23 million taxpayers this year unless Congress comes to the rescue.

Both Bush and Conrad's budgets fail to account for the long-term costs of the war in Iraq and of longer-term AMT relief, and neither assumes war costs for Afghanistan or Iraq after 2009.